FALL 2022 SAN DIEGO dealer OFF ICIAL PUBL ICAT ION OF THE NEW CAR DEALERS ASSOCIAT ION SAN DI EGO COUNTY 2022-2023 NCDA Chairman Ron Fornaca: A Customer Service Heritage
• Business Transactions • Buy-Sell Agreements • DMV, BAR and other governmental approvals • Lender flooring and capital loan agreements • Entity formation and structure • Shareholder Agreements • Manufacturer approvals and relations • NMV non-profit association representation Estate Planning • Succession planning for business continuation • Family estate planning (wills and trusts) Tax • Property tax planning, audits and appeals • Federal estate and gift tax controversies with IRS • EDD audits BUSINESS LAW | LITIGATION | ESTATE PLANNING | REAL ESTATE | TAX | EMPLOYMENT PRACTICES FERRUZZO & FERRUZZO, LLP | A Limited Liability Partnership, including Professional Corporations 3737 Birch Street, Suite 400, Newport Beach, California 92660 | PH: (949) 608-6900 | ferruzzo.com Business Litigation • Consumer Legal Remedies Act lawsuits • Sales and Service Agreements • Disputes before the CA New Motor Vehicle Board • Consumer claims regarding the sale/lease of autos • Manufacturer audit disputes • Hearings before the AQMD, RWQC and OSHA Real Estate • Dealership site acquisitions and lease agreements • Lender opinion letters • Relocations Employment Practices • Arbitration agreements • Wage and hour class action lawsuits • Private Attorneys General Act (PAGA) claims Ferruzzo & Ferruzzo, LLP began providing legal representation to new car and truck dealers nearly four decades ago. Over the course of that time, one of the central goals of the firm has been to remain rooted in our client relationships. With the strength of over 20 attorneys, we provide a spectrum of legal services to support every aspect of running and owning your new car and/or truck dealership. Each member of our team is available to service the needs of you and your dealership.
NCDA STAFF DEAN MANSF I ELD PRES I DENT SCOT T WEBB D I REC TOR OF MARKE T I NG AND OPERAT I ONS D I ANA S I LVA ACCOUNT I NG AND ADMI N I STRAT I ON MANAGER CLAUD I A OLVERA MEE T I NG AND FAC I L I T I ES COORD I NATOR ROBERT HE I NTZ CAL I FORN I A SALES TRA I N I NG ACADEMY I NSTRUC TOR © 2022 New Car Dealers Association® San Diego County (NCDA) | The newsLINK Group, LLC. All rights reserved. San Diego Dealer is published four times each year by The newsLINK Group, LLC for the NCDA and is the official publication for this association. The information contained in this publication is intended to provide general information for review, consideration and education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your specific circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of the NCDA, its board of directors, or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service advertised. San Diego Dealer is a collective work, and as such, some articles are submitted by authors who are independent of the NCDA. While San Diego Dealer encourages a first-print policy, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at 855-747-4003. CHAIRMAN RON FORNACA . . . . . . . . . . . . . . . . . . . . . . . . . D I STR I C T 6 VICE CHAIRMAN DAVE MCCRACKEN . . . . . . . . . . . . . . . . . . .D I STR I C T 3 SECRETARY/TREASURER JOHN SEGAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . D I STR I C T 3 PAST CHAIRMAN V I NCENT CASTRO. . . . . . . . . . . . . . . . . . . . D I STR I C T 2 BOARD MEMBERS CHR I S BAKER…. . . . . . . . . . . . . . . . . . . . . . . . D I STR I C T 1 J EN I FER BAL L…. . . . . . . . . . . . . . . . . . . . . . . D I STR I C T 6 MAT T CRANDAL L…. . . . . . . . . . . . . . . . . D I STR I C T 2 PAUL DYKE…. . . . . . . . . . . . . . . . . . . . . . . . . . . D I STR I C T 4 CHR I S GEORGE . . . . . . . . . . . . . . . . . . . . . . . . .D I STR I C T 4 SCOT T K I EFNER…. . . . . . . . . . . . . . . . . . . . D I STR I C T 2 JASON MOSSY…. . . . . . . . . . . . . . . . . . . . . . D I STR I C T 5 ER I C TRACY. . . . . .…. . . . . . . . . . . . . . . . . . . . . D I STR I C T 1 JUST I N TRUE . . . . . . . . . . . . . . . . . . . . . . . .….D I STR I C T 5 Contents 10065 Mesa Ridge Court San Diego, CA 92121-2916 Tel: (858) 550-0080 Fax: (858) 550-9537 ncda.com 2 Chairman’s Letter 6 2022-2023 NCDA Chairman Ron Fornaca: A Customer Service Heritage 8 Rising Inflation Will Lead to California Minimum Wage Hike in 2023: Five Key Takeaways for Employers 11 New Board Members: Jenifer Ball & Matt Crandall 12 NCDA Golf Tournament & Annual Meeting and Luncheon 16 2023 NADA Show 18 Is My Gas Can Safe? 22 San Diego Auto Outlook 2nd Quarter 2022 12 18 PUB YR 10 2021-2022 | ISSUE 4 1
Ron Fornaca CHAIRMAN’S LETTER As your incoming Chairman of the New Car Dealers Association Board of Directors, I am honored and excited to serve the San Diego County new car dealer community over the next year in this new role. Having been on Board of Directors for several years now, I’ve seen firsthand just how valuable our Association is and how much work is done on behalf of dealers. New car dealers are entering an era that likely will involve unprecedented changes to the way we interact with our customers and vendors. We continue to face ongoing challenges related to the franchise system, regulatory compliance, government relations, and human resources, just to name a few. We operate complex businesses, and the New Car Dealers Association continues to position itself at the forefront of the issues and challenges confronting us today and into the future. I want to thank everyone who attended this year’s Golf Tournament and Annual Meeting/Luncheon. I hope all of you who participated enjoyed your time interacting with your fellow NCDA members at the Maderas Golf Club, the first new venue for this event in more than 25 years! I am very excited to welcome back our San Diego International Auto Show, which, after a two-year hiatus will return on December 30 through January 2. The auto show truly is our best opportunity of the year to engage with the car-buying public as they explore the many makes and models available in the market and make short and long-term purchase decisions. The show will only increase in importance to dealers as we move toward an all-electric future, and I urge all of you to support it in whatever capacity possible. I also encourage you to take full advantage of the incredible benefits offered by the New Car Dealers Association. And please don’t hesitate to reach out to your board members and the Association staff with any issues or questions you might have. I look forward to representing our Association both internally and externally and collaborating with the rest of the Board and Association staff to ensure that we run our businesses effectively and efficiently. Sincerely, Ron Fornaca New car dealers are entering an era that likely will involve unprecedented changes to the way we interact with our customers and vendors. 2 San Diego Dealer
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— Answers support calls 24/7 — Chats and shares screens during business hours — Regularly checks in with your dealership — Works with you to minimize errors and penalties — Analyzes and corrects DMS Fees — Audits each deal for accuracy and compliance — Scans deals for easy access in DMVdesk — Sends audited bundles to DMV — Mails plates, registration and stickers directly to your customers — National title & registration takes care of your out-of-state buyers — Run inquiries (KSR, NMVTIS and more) — Create and print Temp Tags and Reports of Sale — Oer customers free vehicle registration renewal reminders with Vitu Driver — Finalize and submit eFile transactions electronically — Prepare and mail bundles to Vitu for auditing — Send errors to SPU for processing Takes the stress off of your staff DMVdesk is built with your dealership’s security and compliance in mind DMV COMPLIANCE AWARD-WINNING SUPPORT Positively impacts your CSI scores! Translates into real Cost Savings! For you remaining 20% of non-DMVdesk users, discover what a true partnership means. Visit dmvdesk.com or call 877-368-3375 to learn more and schedule a demo. WHY DO OVER 80% OF SAN DIEGO FRANCHISE DEALERS TRUST THEIR TITLE AND REG PROCESSING TO DMVDESK?
“My Dad, Frank, used to always say, ‘There’re three things you do: you take care of your community, you take care of your customers, and you take care of your employees. If you can do those three things, you’ll be very successful.'” said Ron Fornaca, President-Dealer Principal of Frank Subaru and Frank Hyundai. The Fornaca family knows the secret to success. They’ve been running thriving businesses in the San Diego area for over a hundred years. The family’s success can be traced back to what Ron’s father called the three pillars of success. “His driving force defines us all,” said Ron. Ron entered the car business when he was 12 years old. It was the first day of summer, and his dad walked into the boy’s room and said, “Get up! You’re coming to work with me at the dealership this summer.” That was Ron’s first day in the industry. He spent the summer as a lot porter who washed cars when necessary. Later, when he was 18, Ron worked in the parts and sales departments. However, Frank got into the automotive industry in 1965. During that time, he and his brother, Felice, were running the bakery business their father (Ron’s grandfather), Mario Fornaca, started in 1912. Ron’s mom, Mary, was in the market for a new car and was considering getting a Lincoln. While shopping at the local dealer, they had a terrible experience. And Frank realized he could do it better and treat people better, so he purchased the dealership. That is how Ron’s family got into the business. Ron Fornaca graduated from the University of San Diego High School. He studied business in Los Angeles at Loyola Marymount University and graduated with a Bachelor’s of Science degree in 1984. He worked at the family bakery until 1996, then returned to Frank Motors Group. “Taking care of our customers, working with family and building on my father’s legacy is the most rewarding part of my career,” said Ron. “By taking care of customers, we build our dealerships, we continually grow and have the ability to give back to our community. It’s really nice to see happy customers and happy employees. Currently, over 12% of our employee base has been with us for over 20 years. Additionally, we work with many different community partners giving something back throughout the year. Doing all this with family you love is very rewarding.” There was a moment when running the business with his father’s legacy in mind became his driving force. When he made decisions, he sometimes sat back and asked, “What would dad do?” Frank’s driving force defines Ron and his employees. 2022-2023 NCDA Chairman Ron Fornaca: A Customer Service Heritage 6 San Diego Dealer
During Ron’s time at Frank Subaru, the dealership has gone from a small one with a 400-name database to one with more than 5,000 names. There are 40 state-of-the-art service bays, two customer lounges, a dog park and other amenities for customers. The employees are excellent at what they do, and there is a strong emphasis on excellent service. Frank Subaru also has top customer ratings on Yelp and Google; plus both Frank Subaru and Frank Hyundai are J.D. Power Dealer of Excellence award winners. Where cars and trucks are concerned, Ron has simple tastes. He put 316,000 miles on a 2004 Toyota Tundra truck, and when his family told him he had to replace it and get something that wasn’t likely to break down on the side of the road, he replaced it with a 2018 Toyota Tundra. Although he did drive a six-speed Porsche 911 that came into the dealership on trade in 2011, he didn’t drive it very long: it didn’t have cupholders for his morning coffee. Ron appreciates NCDA San Diego because it helps him keep up with ever-changing laws and trends. The association provides seminars and information so dealers can do business effectively. He acknowledges that the dealership business can be difficult and discouraging, but having current information, avoiding discouragement and being persistent make a difference. He recommends looking for small wins instead of a home run and always treating everyone with respect and dignity. In October 2018, Ron received national recognition when he was nominated for the 2019 Time Dealer of the Year award. The award, sponsored by Time magazine and Ally Financial, held its award ceremony in January 2019. And while Ron didn’t win the top prize that year, being recognized by Time, Ally, and his peers was a proud achievement. He explained then: “When you have good people, which we do, I am able to work ‘on the business’ rather than ‘in the business.’ Working on the business allows you to step back and see where you are going and where you need to go. When you work in the business, you are tied up with day-today time-consuming activities, and it allows no time for creativity and planning. A great day is when customers are being taken care of, employees are smiling, and you realize that this is what you planned for.” Service is still the foundation of Frank Motor Group’s success more than a century after Mario opened a French bakery. The Fornaca family has always understood the importance of customer service in any business, and everyone at the dealership knows that customer service is behind the company’s success. Ron values his time with his wife, Cathy, and their family. They have three children: Elise, Nick and Matt. Ron and Cathy like to watch Padres and Gulls games, go to Palm Desert (a family tradition Ron’s father Frank started) and spend time together. PUB YR 10 2021-2022 | ISSUE 4 7
Insights California leads the nation in the call for higher minimum wages, emanating from the agricultural fields and reaching nearly every industry. Raising wages has been a major focus in the California Legislature – and federal and state courts – and employers in the state will likely see a higher wage hike than expected next year. The minimum wage was supposed to reach $15 an hour for all employers in the Golden State by Jan. 1, 2023, but Governor Gavin Newsom recently projected the rate would rise to $15.50 due to record-high inflation. Combined with labor shortages and supply chain disruptions, the costs associated with a higher minimum wage will undeniably impact businesses in 2023. Increased wages mean higher employer-side payroll tax obligations and related costs and will further strain businesses already reeling from the impact of the COVID-19 pandemic and the current economic environment. Given these critical developments, what are the five biggest takeaways for California employers? 1. Small Businesses Face Substantial Increase California’s current minimum wage law, passed in 2016, aimed to raise the minimum wage in phases until it reached $15 per hour for all employers in 2023. The law specifies that if inflation increases by more than 7% between fiscal years 2021 and 2022 (which ends on June 30), then the state’s minimum wage shall increase by 3.5%. The California Department of Finance projected that inflation will exceed 7.6% during this time, thereby triggering the increase in minimum wage effective Jan. 1, 2023. If the inflation rate exceeds the 7% threshold as expected, the $15.50 minimum wage will apply to all California workers. Although this may be a welcome change for an estimated three million workers in California currently paid minimum wage, it will also directly impact the labor costs for businesses across the state regardless of employer size and likely hurt small employers the most. Currently, the state’s minimum wage law is divided into tiers depending on the size of the employer. Effective Jan. 1, 2022, employers with 25 or fewer employees must pay $14 minimum Rising Inflation Will Lead to California Minimum Wage Hike in 2023: Five Key Takeaways for Employers By Fisher Phillips 8 San Diego Dealer
Continued on page 10 wage, whereas employers with 26 or more employees must pay $15 minimum wage. However, the 2023 minimum wage increase will apply to all employers in the state, without a distinction between small and large employers as defined previously. Therefore, small employers (25 or fewer employees) must increase minimum wages by $1.50 per hour starting in 2023, compared to employers with 26 or more employees, which will face only a $0.50 per hour increase to their current minimum wage requirement. So, the relative impact of this increase will be most significant for small employers. 2. Local MinimumWage Ordinances Will Also Increase The prevailing inflationary trends have also resulted in higher local minimumwages for residents in certain geographical areas. On July 1, multiple local minimumwage hikes were enacted across California. Many local jurisdictions throughout the state have their own minimumwage requirements that are higher than the state’s minimumwage. Notably, these local minimumwage rates do not impact most exempt employees’ minimum salary and pay requirements. However, they generally apply to any non-exempt employee working within the geographic boundaries of the local jurisdiction, regardless of the location of a company’s offices or headquarters. Employers should stay updated on local minimumwage ordinances and state minimumwage rates to ensure compliance with all applicable minimumwage requirements. 3. California Employers May See Additional Minimum Wage Hikes Worker advocates across California seek to increase the state’s minimum wage to $18 per hour. Proponents of the Living Wage Act of 2022 have gathered more than a million signatures in an effort to put a measure on the ballot in November 2022 that would allow voters to decide whether or not to make the change. This measure would increase the state’s minimum wage by $1.00 each year starting in 2023 and would follow the same tiered approach as the state’s current minimum wage law. Under this measure, employers with 26 or more employees would be required to pay the $18 minimum wage by 2025, and employers with 25 or fewer employees would be required to pay the $18 minimum wage by 2026. We’re still waiting to find out if the Living Wage Act has collected enough certified signatures to appear on the November ballot. 4. Federal MinimumWage is Unlikely to Rise Anytime Soon California is not the only state facing pressure to increase the minimum wage. Twenty-one states rolled out wage hikes on January 1 this year, and 11 states are scheduled to increase their minimum wage rates in 2023 (Alaska, Arizona, Colorado, Hawaii, Maine, Minnesota, Montana, Ohio, South Dakota, Vermont, and Washington). Additionally, many local jurisdictions across the country are implementing their own wage rules. Notably, 20 states currently follow the federal minimum wage, which was last updated in 2009 and remains at $7.25 per hour (approximately $15,000 annually for a full-time employee). Although President Biden has pushed for a $15 federal minimum wage, there does not appear to be a congressional consensus to increase the federal rate in the near future. You should expect more efforts from worker advocacy groups to increase the minimum wage on a national scale. Among other developments, the IRS recognized the impact of inflation on consumers and recently increased the optional standard mileage rate for business travel to 62.5 cents per mile starting July 1. The IRS also announced inflation-adjusted increases for 2023 health care savings accounts and highdeductible healthcare plans. 5. MinimumWage Increases Have Additional Pay Implications A minimum wage hike in California affects other key wage thresholds, including the following: • Overtime and double-time rates. As employers face labor shortages, many employees work longer hours and more overtime to bridge the gap. Many employers also offer recruitment and retention bonuses to attract and retain employees in light of the competitive job market. With the increase in minimum wage, employers should also prepare for proportional increases to overtime and double-time pay rates. In 2023, the minimum rate for overtime would be $23.25 per hour and $31 per hour for double-time (based on a $15.50 minimum wage). Additionally, nondiscretionary bonuses and other incentive compensation paid to employees must be factored into employees’ regular rates of pay for overtime purposes, further increasing the costs for employee overtime and double-time hours. Therefore, you should review your practices to pay rates correctly. • Minimum salary requirement for “white-collar” exemptions. Employees exempt from overtime and meal and rest period requirements under the professional, administrative, or executive exemptions must be paid at least two times the state minimum wage to qualify for the exemption. The $15.50 minimum wage increase means that the minimum salary for white-collar overtime exemptions in California will increase to $64,480 annually or $1,240 weekly ($15.50 x 2 x 40 hours). • Minimum hourly earnings for exempt commission salespeople. Certain salespeople who primarily receive commissions will be exempt from overtime under the commissioned salesperson exemption (applicable only to Wage Orders 4 and 7) if they earn more than 1.5 times the state minimum wage. The minimum wage increase means that starting in 2023, these employees will need PUB YR 10 2021-2022 | ISSUE 4 9
Continued from page 9 Considine & Considine is a full service public accounting firm offering professional and personalized services to business and professional practice owners in the areas of audit, taxation, accounting, estate and retirement planning. Philip Smith, CPA Considine & Considine 8989 Rio San Diego Drive, Suite 250 San Diego, CA 92108 619-231-1977 x103 www.cccpa.com prs@cccpa.com Let us help guide your business development. to earn more than $23.25 per hour and satisfy all other requirements to qualify for the exemption. • Increase in tool-pay. Employees required to supply and maintain their personal hand tools to perform their job must be paid California’s “tool wage,” equivalent to double the state minimum wage, or $31 per hour, starting in 2023. • Non-sales activity and rest-period pay. Employees paid commissions or on a piece-rate basis will also need to be paid at least the increased minimum wage rate for nonsales activity and rest period time. Employers may need to review employee compensation plans to determine whether the pay plans need to be updated or revised to be consistent with the increased minimum wage rate. • Split-shift premiums. The minimum wage section of the Wage Orders provides that employees who work split shifts are entitled to an extra hour of pay at the minimum wage (although employees paid higher than the minimum wage may receive credits toward the one-hour premium). • Meal and lodging credits. The Wage Orders provide certain minimum-wage meal and lodging credits that will change when the minimum wage increases. How Should Employers Prepare for Minimum Wage Increases? With minimum-wage increases on the horizon, employers should forecast these changes in their fiscal planning and determine the potential impact on business operations to plan and prepare for these changes in the near future. Among other steps, many employers will likely increase consumer prices to cover higher labor expenses. The increase in the minimum wage may also pressure employers to increase wage rates across the organization, not just those who will benefit from the minimum wage increase. This may be especially true for employees already being paid in the $20 to $25 range, who may expect or demand a pay raise in light of the increase to the minimum wage for less skilled or experienced workers. Consider auditing your pay practices and reviewing employee compensation plans to ensure compliance with current wage and hour requirements and prepare for any updates needed to your policies and practices well in advance of Jan. 1, 2023, the effective date (or July 1, 2022, in some localities) for minimum wage increases. With wages continuing to rise, the potential exposure and liability for non-compliant employment practices will also rise. Employers dealing with lawsuits or complaints about their pay practices should seek creative solutions. Fisher Phillips is here to help employers navigate these tumultuous times. Because of the far-reaching implications of a minimum-wage increase, now is the time to act, as 2022 continues to be a challenging year for businesses and employers. Make sure you are subscribed to Fisher Phillips’ Insight System to get the most up-to-date information. Please reach out to your Fisher Phillips attorney, the authors of this Insight, or any attorney in our California offices with any questions or to discuss any of the topics addressed above. With minimum-wage increases on the horizon, employers should forecast these changes in their fiscal planning and determine the potential impact on business operations to plan and prepare for these changes in the near future. 10 San Diego Dealer
Matt Crandall, General Manager, Audi of Escondido Jenifer Ball, Ball Automotive Group – Acura, Honda and KIA, Managing Partner Matt is originally from Sacramento, CA, and moved to San Diego 28 years ago. A graduate of the NADA Academy in 2009, Matt’s dealership career has included various roles over his 21 years with the Penske Automotive Group and 23 years representing the Audi brand. Matt is married with one daughter and one son, and he enjoys skiing, golf, projects around the house, spending time with family, and working on a 1968 Mustang. Jenifer Ball is a native San Diegan and third-generation dealer. She has been in the automotive business for over 20 years and began her career working in the business office, filing documents. Jenifer is a graduate of both the University of San Diego and NADA’s Dealer Academy. She is married with one son and a dog, and she enjoys water sports, snow skiing, and spending time with family. New Board Members: Jenifer Ball & Matt Crandall The Fisher Phillips Automotive Dealership Team has represented automobile and other vehicle dealers and dealer groups nationwide for over half a century. When you call us for advice, you instantly tap into decades of experience dealing with your industry and the resources of a firm exclusively devoted to labor and employment law. You won’t have to explain what F&I managers do or how service technicians are paid. Our long and close association with the retail automobile industry uniquely positions us to help you solve your employee problems with minimal disruption. Workplace Solutions for Employers 4747 Executive Drive, Suite 1000, San Diego, CA 92121 | 858.597.9600 fisherphillips.com PUB YR 10 2021-2022 | ISSUE 4 11
NCDA Golf Tournament & Annual Meeting and Luncheon Thank you to all of our sponsors and participants for making this such a wonderful event! 12 San Diego Dealer
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Tommy Struchen and his team service about 450 vehicles a month. To move all these cars through the dealership efficiently, he needed to streamline communications between dealership employees as well as with customers. With VUE, the Service team can communicate immediately with other employees within the DMS. Technicians can take notes and send them to their advisors, so there is no miscommunication about the repair orders. When advisors inspect vehicles, technicians can see what tickets are assigned to them and appropriately plan for it in real time. EASE OF USE. CONSIDER VUE DMS. RECONSIDER Since the install, processes have been a lot more seamless. From technicians to service advisors to including even the parts department. It made everyone’s job so much easier. Tommy Struchen Service Manager, Mack Grubbs Hyundai CONSIDER VUE DMS 866.928.3210 | VUEDMS .COM/CALIFORNIA
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Is My Gas Can Safe? What Happened In the parking lot of a dealership in southern California, an individual was rinsing cars with DI water using pressure washer equipment located on the back of a pickup truck. The pressure washer had a gasoline-powered motor. During the course of rinsing, the gasoline level went low. The operator got a can full of gasoline and started pouring gasoline into the gasoline tank on the pressure washer while the motor was running. A fireball and explosion resulted. The gasoline spilled on the plastic bed of the pickup truck, and the flames quickly melted the plastic. Surprisingly, the operator suffered minimal injuries, and there were no damages beyond the pressure washer equipment and bed of the pickup truck. The General Manager noted that years of safety training and preparedness paid off. Employees trained by CSI responded quickly with fire extinguishers and put out the fire. The fire could have seriously harmed the operator and expanded beyond the truck. Safety training in both handling and storage of flammable materials and emergency response is paramount to avoid such types of accidents. Gas Can The maintenance and operation of gasoline tanks, both aboveground and underground, has become expensive, highly regulated, and burdensome. Automobile dealers have resorted to gas dolly equipment where a small amount of gasoline can be added to each new automobile delivered to the dealership. We note that automobiles delivered to dealerships from manufacturers have very small amounts of gasoline; this being a result of U.S. Department of Transportation (DOT) regulations, which dictate that minimal amounts of gasoline be retained in gas tanks of vehicles in transport. This memo briefly discusses the DOT, OSHA, and CARB regulations applicable to the gas can used to transport from a public gasoline station to dealerships to later fill in automobiles on the lot. Federal DOT Regulations Gasoline transport is discussed in Section 173.6 of the DOT regulations under “material of transport exceptions.” The least burdensome regulations require that a container being used to transport gasoline must be less than eight gallons per container and a maximum of 72 total gallons (440 pounds) on the vehicle. At this level, only a regular driver’s license is needed, and no placarding is required for the vehicle. Driver training must include Hazard Communication Program (29 CFR 1910.1200) and DOT Materials of Trade training. Transport of gasoline in the amount greater than listed above increases the regulatory burden. (https://www.nwcg.gov/sites/default/files/publications/pms442.pdf and http://www.gpo.gov/fdsys/pkg/CFR-2011-title49-vol2/pdf/CFR2011-title49-vol2-sec173-6.pdf) Safety Safety concerns for gasoline containers are as follows: • Properly labeled container with hazard warnings. Wear eye protection and nitrile gloves. • The containers must be secured in the vehicle. • Containers UL certified. • Containers must be closed to minimize the risk of spills and creating a fire hazard. By Celly Services, Inc. 18 San Diego Dealer
• Spill-proof spouts also lock in vapors to avoid vapor release while in storage. Do not overfill gas tanks on automobiles. • Store on a flat surface and transfer in areas with good ventilation or open areas. • 29 CFR § 1926.152(a)(1) states that “Only approved containers and portable tanks shall be used for storage and handling of flammable liquids. Approved safety cans or DOT-approved containers shall be used for the handling and use of flammable liquids in quantities of five gallons or less.” • Bonding of containers to eliminate static electricity both at the time of filling up the containers and when transferring from container to container should be undertaken. Keep containers on the ground when filling and not on the bed of the truck. Use grounding wire when necessary. Keep nozzle in contact with can during filling. Do not fill containers over 95% to allow for expansion. Spilled gasoline must evaporate before containers are put on the truck. • Transport vehicle must have a spill kit available to contain an accidental spill. Operator must be trained on containing, cleaning, and managing an accidental spill. • Ignition sources such as open flames, torches, running motors, electrical tools & equipment, etc. must be at least 20 feet (measured horizontally) from the flammable material, per 29 CFR § 1926.352(c). • One 5-B:C or two 4-B:C fire extinguishers are mandatory on the vehicle transporting gas. Plastic or Metal Studies at Worcester Polytechnic Institute’s Department of Fire Protection Engineering, as reported by NBC News in late 2013, have indicated that under certain conditions, plastic cans are vulnerable to fires with explosive force. The conditions that present the higher risk include having a very small amount of gasoline (a few teaspoons) inside the gas can, cool temperatures, tilting the can at 42 degrees (typical pour angle) and, of course, a spark! The employees should be trained to avoid these risky conditions and even buy metal cans in the future. (https://www.nbcnews.com/news/world/ watch-gas-can-explode-lab-test-flna2d11691287) CA Air Resources Board (CARB) As of July 1, 2007, all Portable Fuel Containers (PFC) sold in California must be certified by the Air Resources Board as meeting low-emission standards and regulatory requirements. This regulation is applicable to manufacturers and retailers who place gas cans in the stream of commerce. Only containers of ten gallons or less are covered by this regulation, so the sale of a 25-gallon gas caddy for shop use is exempt from CARB regulations. The following table provides a listing of those CARBapproved containers certified for sale: http://www.arb.ca.gov/ consprod/fuel-containers/pfc/eo/eo.htm. Summary CA-based businesses have only CARB-approved containers available. Other states may use these CARB-approved containers with vapor locks that are spill-proof and emit negligible flammable vapors and hence, are safer. Training in hazardous materials, including information on risks associated with plastic cans, should be provided to employees. Following safety and operation instructions on the PFC is also mandatory. DISCLAIMER: The contents of this article are for informational purposes only and are not to be considered as legal advice. Employersmust consult their lawyer for legalmattersandEPA/OSHAconsultants formatters related to Environmental, Health& Safety. The articlewas authored by SamCelly of Celly Services, Inc., whohas beenhelpingautomobiledealers inArizona, California, Hawaii, Idaho, Nevada, New Mexico, New York, Texas, and Virginia comply with EPA andOSHA regulations for over 35 years. Sam is a Certified Safety Professional (No. 16515) certified by the National Board of Certified Safety Professionals. Samreceived his BE (1984) andMS (1986) inChemical Engineering, followed by a J.D. fromSouthwesternUniversity School of Law (1997). Sam is amember of the American Chemical Society (No. 31176063), American Industrial Hygiene Association (No. 124715), and National Association of Dealer Counsel (NADC). Sam also serves on the Board of Orange County American Industrial Hygiene Association and on CA Industrial Hygiene Council (CIHC). Your comments/questions are always welcome. Please send them to sam@cellyservices.com. Automobile dealers have resorted to gas dolly equipment where a small amount of gasoline can be added to each new automobile delivered to the dealership. PUB YR 10 2021-2022 | ISSUE 4 19
OUR SERVICES • Illness & Injury Prevention • Safety Inspection & Training • Spill Prevention Control & Countermeasures Plan • Newsletters on Emerging EPA/OSHA Issues • Hazardous Waste Management • Hazardous Waste Cost Recovery • Haz Mat Release Response • Respiratory Protection • Representation in OSHA Enforcement Cases • Phase I Environmental Assessment • Regulatory Permits & Reporting Celly Services, Inc. • Sam Celly, BChE MChE JD • Certified Safety Professional • sam@cellyservices.com • (562) 716-6100 WHY CHOOSE US We provide specific solutions for dealerships through comprehensive site analysis, employee training, and newsletters. We are available online, onsite and on the phone to answer questions and solve problems. We provide perspective and experience that is unmatched in the industry. ABOUT CSI CSI is an employee-owned EHS consulting firm based in California with Certified Safety Professionals on staff. Today, we have hundreds of satisfied auto dealership clients in California, Arizona, Hawaii, Nevada, Idaho, Texas and Washington. WE HELP DEALERSHIPS NAVIGATE COMPLIANCE With over 35 years in the automotive EHS business, we understand compliance in California. From proactive management to oil rebates, we can help you stay ahead of ever-changing regulations and keep your employees safe.
Plan ahead for your dealership’s long-term legacy Setting up a succession plan is an important consideration for the future of your dealership. Now’s the time to think about your priorities, such as maintaining control, taxes, liquidity, employees and family. What would you like the power to do?® Learn more with our comprehensive overview of Dealer Financial Services Succession Planning at business.bofa.com/dealer. “Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and Members of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA. Investment products offered by Investment Banking Affiliates: | Are Not FDIC Insured | Are Not Bank Guaranteed | May Lose Value | ©2022 Bank of America Corporation. All rights reserved. 4882341 05-22-0512 Plan ahead for your dealership’s long-ter legacy Setting up a succession plan is an important consideration for the future of your dealership. Now’s the time to think about your priorities, such as maintaining control, taxes, liquidity, employees and family. What would you like the power to do?® Learn more with our comprehensive overvie i l Services Succession Pla ing at busine s.bof . “Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and Members of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA. Investment products offered by Investment Banking Affiliates: | Are Not FDIC Insured | Are Not Bank Guaranteed | May Lose Value | ©2022 Bank of America Corporation. All rights reserved. 4882341 05-22-0512
x 156572 152543 143314 138349 119841 139335 135300 0 50,000 100,000 150,000 200,000 2016 2017 2018 2019 2020 2021 2022 Forecast New light vehicle registrations Covering Second Quarter 2022 Volume 22, Number 3 San Diego Auto Outlook Comprehensive information on the San Diego County new vehicle market Market Summary Annual Trend in San Diego County Market Domestics consist of vehicles sold by GM, Ford, Stellantis (excluding Alfa Romeo and FIAT), and Tesla. Data Source: AutoCount data from Experian. The graph above shows annual new retail light vehicle registrations from 2016 thru 2021 and Auto Outlook’s projection for 2022. Historical Data Source: AutoCount data from Experian. YTD '21 YTD '22 % Chg. Mkt. Share June June '21 to '22 YTD '22 TOTAL 75,263 65,040 -13.6% Car 22,951 18,779 -18.2% 28.9% Light Truck 52,312 46,261 -11.6% 71.1% Domestic 21,156 19,832 -6.3% 30.5% European 11,636 10,095 -13.2% 15.5% Japanese 35,563 28,100 -21.0% 43.2% Korean 6,908 7,013 1.5% 10.8% Pent up demand is accumulating. Auto Outlook estimates that 29,200 new vehicle purchases have been postponed since the onset of the pandemic and ensuing vehicle supply shortages. This will provide a boost to sales for an extended period. The labor market is near full employment. As mentioned on the right, recession might be around the corner and new vehicle affordability has weakened, but the unemployment rate is very low and jobs are generally, plentiful. It’s rare for the economy to enter a prolonged downturn when the labor market is as tight as it is now. Household wealth has increased. Household net worth has reached record highs and consumers have greatly increased their holdings of cash and equivalents. This will help households in weathering any prospective economic downturn. Impressive array of new products coming out. The bevy of new models being introduced offering alternative powertrains and advanced technology should lure many new vehicle shoppers into the market. Lean supplies have placed a ceiling on sales levels. The lingering microchip shortage and pandemic-related supply issues continue to be the primary factor impacting the market. Demand will soften in the coming months, but insufficient production is still the main roadblock holding back sales. New vehicle affordability has taken a turn for the worse. Tight inventories have pushed vehicle prices upward, rising fuel prices have cut into disposable income, and higher interest rates are boosting monthly payments. Higher wages have helped, but monthly vehicle loan and lease costs as a percent of disposable income have moved higher during the past several months. Chances of recession have increased. GDP growth declined in the First Quarter of this year and many economists expect a recession as the Fed puts the brakes on the economy to fight inflation. New vehicle sales almost always decline during economic downturns, but lean supplies have already pushed sales to very low levels. It would take a deep recession for sales to decline further. Forecast for County New Retail Light Vehicle Registrations in 2022 Baseline scenario: 135,500 down 2.9% vs. ‘21 Alternative upside: 140,900 up 1.1% vs. ‘21 Alternative downside: 127,600 down 8.4% vs. ‘21 FORECAST Tight Supplies Continue to Dictate Pace of County New Vehicle Sales Key factors boosting new vehicle sales Key factors holding back new vehicle sales Key Trends in San Diego County Market • New retail registrations during the first six months of this year fell 13.6% versus year earlier. Strong results for Tesla prevented a steeper decline. Tesla registrations in San Diego County were up 57.2% so far this year. Excluding Tesla, the market fell by 17.7% in the first half of 2022. • BEV (battery electric vehicle) share was 14.2% in the first half of 2022 (see page 4). 22 San Diego Dealer
Continued on page 24 Page 2 San Diego Auto Outlook San Diego Auto Outlook Published by: Auto Outlook, Inc. PO Box 390, Exton, PA 19341 Phone: 610-640-1233 EMail: jfoltz@autooutlook.com Editor: Jeffrey A. Foltz Information quoted must be attributed to San Diego Auto Outlook, published by Auto Outlook, Inc. on behalf of the New Car Dealers Association San Diego County, and must also include the statement: “Data Source: AutoCount Data from Experian.” At Auto Outlook, we strive to provide sound and accurate analyses and forecasts based upon the data available to us. However, our forecasts are derived from thirdparty data and contain a number of assumptions made by Auto Outlook and its management, including, without limitation, the accuracy of the data compiled. As a result, Auto Outlook can make no representation or warranty with respect to the accuracy or completeness of the data we provide or the forecasts or projections that we make based upon such data. Auto Outlook expressly disclaims any such warranties, and undue reliance should not be placed on any such data, forecasts, projections, or predictions. Auto Outlook undertakes no obligation to update or revise any predictions or forecasts, whether as a result of any new data, the occurrence of future events, or otherwise. San Diego County New Vehicle Market Dashboard San Diego County New Vehicle Mark t D shboard Data Source: AutoCount data from Experian. SAAR estimates: Auto Outlook. COUNTY MARKET VS. U.S. San Diego County DOWN 13.6% U.S. DOWN 17.9% Source for county registrations: AutoCount data from Experian. U.S. figures estimated by Auto Outlook. MARKET PERFORMANCE DURING PAST TWO YEARS San Diego County Quarterly Registrations Seasonally Adjusted Annual Rate, Converted to Equivalent U.S. New Vehicle Market SAAR (millions of units) 15.2 9.8 14.3 15.4 15.7 17.7 15.0 13.6 14.7 14.2 Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Millions % Change In New Retail Market YTD ‘22 thru June vs. YTD ‘21 New retail light vehicle registrations in San Diego County declined by 13.6% during the first six months of this year versus year earlier, better than the 17.9% drop in the Nation. The graph on the left provides an easily recognizable way to gauge the strength of the county market. It shows quarterly registrations based on a seasonally adjusted annual rate. These figures are then indexed to SAAR sales figures for the U.S. new vehicle market. So just like in the national market, when the quarterly SAAR is above 17 million units, the county market is strong, 15 million is about average, and below 13 million is weak. Quarterly registrations stayed below 15 million units in the first two quarters of this year. PUB YR 10 2021-2022 | ISSUE 4 23
Continued from page 23 Covering Second Quarter 2022 Page 3 0.5 0.7 0.9 1.1 1.3 1.5 1.7 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 Feb-18 May-18 Aug-18 Nov-18 Feb-19 May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22 May-22 Millions BMW 3.8% Subaru 4.3% Kia 5.1% Nissan 5.2% Chevrolet 5.3% Hyundai 5.4% Ford 7.9% Honda 9.6% Tesla 10.0% Toyota 17.4% Honda CR-V 1.8% Honda Accord 2.2% Toyota Tacoma 2.3% Chevrolet Silverado 2.3% Toyota Camry 2.4% Toyota Corolla 2.4% Honda Civic 2.5% Tesla Model 3 4.3% Toyota RAV4 4.4% Tesla Model Y 4.7% San Diego County New Vehicle Market Dashboard TOP TEN RANKINGS IN COUNTY MARKET Data Source: AutoCount data from Experian. Market Share for Top Ten Selling Brands in County Market YTD 2022 thru June Market Share for Top Ten Selling Models in County Market YTD 2022 thru June -40.0 -30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 40.0 '18 '19 '20 '21 '22 Chg. vs. preceding quarter Quarters shown for each year TRACKING ECONOMIC INDICATORS Total Employment in San Diego County The county unemployment rate fell to just 2.7% in May of this year and total employment moved closer to prepandemic levels. U.S. GDP declined in the First Quarter of 2022 and many economists are predicting a recession, but the strong labor market should partially offset the negative consequences of the softening economy. Consumer sentiment fell to low levels as inflation picked up steam. Up $1.74 vs. year earlier MAY 2021 SU MO TU WE TH FR SA 6.6% Monthly Unemployment Rates in San Diego County APRIL 2022 SU MO TU WE TH FR SA 3.0% MAY 2022 SU MO TU WE TH FR SA 2.7% Average Hourly Earnings for All Workers in County - May 2022 $36.69 University of Michigan Consumer Sentiment (U.S.) Key Values During Past 10 Years Sources: Bureau of Labor Statistics, University of Michigan, and U.S. Bureau of Econ. Analysis. Percent Change in U.S. Gross Domestic Product Change vs. previous quarter 10 year high - 101.4 (Mar. 2018) 12 month high - 85.5 (Jun. 2021) Most recent - 50.0 (June 2022) 24 San Diego Dealer
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